Economic development of border regions (course: ) INTRODUCTION Dmitry Zimin

Different meanings of “development” 1.“Development” as a static situation on a fixed date – as a “level of development”; 2.“Development” as a dynamic process of change; it has some direction and speed.

What is “economic development”? Economic development is an increase in complexity (labour productivity) in the structure of production and of employment. Economic growth is not the same thing as economic development. Two key parameters of economic life: – Production /output (GDP = value added) and – Employment. Economic development: in whose interest?

What is “a region”? There are several different meanings: Supra-national (Macro-) regions; Sub-national regions: regions within the same state – its constitutive parts; Trans-national (or “cross-border”) regions: associations of sub-national regions belonging to different nation-states; Historical regions: an area characterized by distinctive historical features (ethnic, political, cultural, etc.). Example: Karelia

Theoretical background Adam Smith ( ) and David Ricardo ( ): free trade is mutually beneficial for all participants – ideology of globalization; Friedrich List ( ): less developed coutries can benefit from protectionist measures (i.e. from economic borders). Today: Macro-regional economic blocs combine internal freedom of trade with external protectionism (e.g. EU, NAFTA).

Transparency – key characteristic of border regime To what extent do economic borders constitute a barrier for free movement of goods, services, money, people and intellectual property? High transparency leads to economic integration Border regimes are often asymmetric in terms of transparency

Levels of economic bordering: Corporate level: borders between enterprises (e.g. commercial secrets); State level: borders between states (e.g. customs regulations); Global level: borders between economic blocs (e.g. NAFTA, EU, ASEAN)

Elements of economic border regime: Foreign exchange controls, currency exchange rates; Customs duties; Import and export quotas; Taxation (e.g. taxes on repatriation of profits); Technical and other standards; Immigration control; Restrictions on residents/non-residents; Physical border infrastructure (location of border crossings); Cultural barriers (e.g. foreign language).

Border-breaking practices: bilateral and multilateral integration arrangements (e.g. common market); special economic / customs zones; cross-border subcontracting; “teleworking”; tax avoidance; tax evasion (transfer pricing, double invoicing); smuggling.

Cross-border interaction dilemma: How to find a right balance between economic openness (integration) and economic protectionism (bordering)? On-going global economic crisis has stimulated re-bordering.

Regions are classified: In the EU: Nomenclature of territorial units for statistics (NUTS) In Russia: All-Russian Nomenclature of Administrative-Territorial Units (OKATO)

North Karelia: NUTS 4 and NUTS 5

Russian Karelia: sub-regions & municipalities

This course focuses on economic development of sub-national regions situated along the Finnish-Russian border.

Lectures: 1.Introduction – (Dmitry Zimin – DZ) 2.Human capital and social problems in Russian border regions – (DZ) 3.Borders and economy – (Heikki Eskelinen) 4. Cross-border co-operation instruments: what they are and how they work – (Matti Fritsch)

Lectures: 5.Economic geography of Russian border regions – (DZ) 6.Finnish companies in Russian border regions – 6.11 (DZ) 7.Can we educate Russians in human resource management? – (Markku Sippola) in room AU111 8.Russia – a tourist nation? – (Antti Honkanen)

Lectures: 9.The border as a factor influencing the development of the Finnish forest sector – (Jakob Donner-Amnell) 10. Geopolitical aspects of Finnish-Russian interaction – (DZ) in room AU111 * Written exam: 25.11, room M301 * Re-sit exam: 9.12, room M301

Course-paper (optional, only for Master-degree students – 2 credits) Size: around 5000 words You choose the topic: something on economic development, business, trade, investments, tourism in Northwest Russia or Eastern Finland Deadline: 15 December 2013 Delivery: in electronic form (PDF or DOC) to: